Style Underperformer:
Sector Underperformers:
- 1) Biotech -3.06% 2) Alt Energy -2.71% 3) Networking -2.36%
Stocks Falling on Unusual Volume:
- ANAC, INSM, CLDX, AEGR, CLVS, GMCR, GDOT, FAST, LRN, ICPT, ADTN, YUM, GWPH, IBB, PBYI, AMBC, ACAD, PCYC, CGIX, CAS, PINC, NQ, RBA, ALNY, MZOR, FENG, GDP, GDOT, NUS, DFRG, CLDX, BUD, YOKU, SGMO, NUS, DDD, NPSP, XOOM, SGEN, NFLX, ECYT, INCY, GTLS, MDSO, GRPN, INFI, CLNE, TSLA, MPWR, PRLB, ANGI, NCR, YELP and BX
Stocks With Unusual Put Option Activity:
- 1) VMW 2) OIH 3) CVX 4) IBB 5) COST
Stocks With Most Negative News Mentions:
- 1) YUM 2) JNPR 3) TSLA 4) HRB 5) DIS
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Utilities +1.01% 2) Medical Equipment +.59% 3) Telecom +.48%
Stocks Rising on Unusual Volume:
Stocks With Unusual Call Option Activity:
- 1) RFMD 2) ARIA 3) SVU 4) AEGR 5) TMUS
Stocks With Most Positive News Mentions:
- 1) BA 2) PGR 3) KMB 4) MW 5) AA
Charts:
Evening Headlines
Bloomberg:
- Emerging-Market Economic Growth Stays Sluggish, HSBC Says. Emerging-market
economic growth
remains “muted” with a confidence gauge just above the
threshold signaling expansion, according to HSBC Holdings Plc. (HSBA)
The HSBC Emerging Markets Index rose to 50.8 in September from 50.7 in
August, the bank said in a report published today, citing a survey of
purchasing managers. That’s still the third-lowest reading in more than
four years. A value above 50 indicates expansion and below 50
signals contraction. The index is compiled by London-based Markit
Economics and tracks conditions at more than 5,000 companies.
- ICBC’s Basel III Bond Falling Most Reflects Unease: China Credit. Asia’s
first Basel III dollar bonds, sold by Industrial & Commercial Bank
of China Asia Ltd., are the region’s worst-performing new notes this
month, showing investor concern tighter regulations could cause losses. The subordinated debt, priced on Oct. 2, fell 1.1 cents on
the dollar as of Oct. 7, more than any other Asian notes issued
in October, prices compiled by Bloomberg show. The drop
contrasts with a 0.1 percent gain for junior bonds in the
region, according to Bank of America Merrill Lynch indexes.
- Taiwan Warns That China Could Mount Successful Invasion by 2020. China may be able to successfully invade Taiwan by 2020 as it develops technology to prevent
allies such as the U.S. from coming to the island’s aid, the
Taiwanese defense ministry said. A military modernization campaign has seen China’s People’s
Liberation Army enhance its ability to make long-range precision
strikes and develop so-called area-denial technology, the
ministry said in its 2013 National Defense Report.
- India Unrest Puts 21 Million in Dark as Outages Threaten Google(GOOG). Protests against a plan to split a southern Indian state entered a
fourth day, leaving about 21 million people without electricity as
outages threatened to affect technology companies like Google Inc. (GOOG) and Microsoft (MSFT) Corp.
Striking workers shuttered power plants and impeded distribution,
extending blackouts that started Oct. 6 in six districts of Andhra
Pradesh. The protesters oppose Prime Minister Manmohan Singh’s move last
week to divide the state before national elections due by May.
- Yum(YUM) Profit Declines 68% as Same-Store Sales Slump in China. Yum! Brands
Inc., whose KFC fast-food chain is facing more competition in China,
said third-quarter profit fell 68 percent and cut its 2013 earnings
forecast as same-store sales dropped in the Asian nation. Net income
(YUM:US) decreased to $152 million, or 33 cents a share, from $471
million, or $1, a year earlier, the Louisville, Kentucky-based company
said today in a statement. Excluding certain items, profit was 85 cents a
share. Analysts projected 92 cents, the average of 23 estimates
(YUM:US) compiled by Bloomberg.
- South Korea Confirms North Has Restarted Main Nuclear Site. North
Korea restarted its Yongbyon nuclear reactor, a South Korean lawmaker
said, as the North put its troops on high alert and said it’s “ready to
confront” the U.S. and the South over naval drills set for this week.
The National Intelligence Service informed lawmakers of the restart,
ruling New Frontier Party lawmaker Cho Won Jin said by phone yesterday.
Lawmakers were also told that North Korean
leader Kim Jong Un told his cabinet he plans to seek
reunification with the South by force in three years, Cho said.
- Asian Stocks Outside Japan Decline on U.S. Gridlock, IMF.
Asian stocks outside Japan fell on concern the impasse over the U.S.
debt limit may lead to a default and after the International Monetary
Fund cut its global outlook. Japanese shares reversed losses after the
yen weakened. The MSCI Asia Pacific ex-Japan Index slid 0.3 percent to 465.60 as of 12:36 p.m. in Tokyo, while the broader regional
gauge was little changed at 138.49.
- Rubber Retreats as IMF’s Growth Outlook Weakens Demand Outlook. Rubber retreated from a one-week high
after the International Monetary Fund cut its global growth outlook for this year and next, raising concern demand may
weaken for the commodity used in tires.
The contract for March delivery on the Tokyo Commodity
Exchange fell as much as 1.1 percent to 261.2 yen a kilogram
($2,688 a metric ton) and traded at 263.1 yen at 10:30 a.m.
- Rebar Trades Near 3-Month Low as IMF Cuts China Growth Outlook.
Steel reinforcement-bar futures traded near the lowest level in three
months after the International Monetary Fund cut its forecast for
China’s economic growth, damping demand for the building material. Rebar for delivery in January on the Shanghai Futures Exchange fell as much as 0.5 percent to 3,580 yuan ($585) a
metric ton and traded at 3,585 yuan at 10:14 a.m. local time.
Futures fell to 3,541 yuan yesterday, the lowest for a most-active contract since July 2.
Wall Street Journal:
- Janet Yellen, a Backer of Pushing the Fed's Policy Boundaries. Expected Nominee for Central-Bank Chief Has Easy-Money Leanings.
Janet Yellen's computer screen saver on a neat desk in her office at
the Federal Reserve is a photo of the garden at her home in Berkeley,
Calif. If the Senate confirms her to be the central bank's next leader,
the colorful patch of ground will remain a distant memory for much of
the next four years. These days Ms. Yellen is more focused on helping
other things grow, such as consumer spending, investment and most of all
jobs—all reasons President Barack Obama plans to announce Wednesday he
will nominate the methodical and meticulous economist to run the Fed.
- Paul Ryan: Here's How We Can End This Stalemate. Both Reagan and Clinton negotiated debt-ceiling deals with their opponents. We're ready to negotiate. The president is giving Congress the silent treatment. He's refusing to
talk, even though the federal government is about to hit the debt
ceiling. That's a shame—because this doesn't have to be another crisis.
It could be a breakthrough. We have an opportunity here to pay down the
national debt and jump-start the economy, if we start talking, and
talking specifics, now. To break the deadlock, both sides should agree
to common-sense reforms of the country's entitlement programs and tax
code.
Fox News:
- Boehner dismisses Obama's position on fiscal crisis as 'not sustainable'. House Speaker John Boehner dismissed President Obama’s position on
the fiscal crisis as “not sustainable” Tuesday, only hours after Obama
held a non-press conference to say he was willing to compromise but not
negotiate. "What the president said today was, if there's unconditional
surrender by Republicans, he'll sit down and talk with us. That's not
the way our government works," Boehner said. The speaker said he wants conversations about spending cuts to start "now," not "next week" or "next month."
CNBC:
Zero Hedge:
ValueWalk:
Business Insider:
Washington Post:
- U.S. plans to curb military aid to Egypt. The Obama administration is expected to announce curbs on most
nonessential military aid to Egypt within a few days, a U.S. official
said Tuesday, marking a stunning turnaround for U.S. relations with one
of its key Arab allies. The official would not provide details or figures about the aid
to be suspended, but the action is likely to cover most of the $1.2
billion in military assistance to Egypt. The official spoke on the
condition of anonymity because Congress has not been fully notified, and
the announcement could be postponed.
Reuters:
Telegraph:
China Securities Journal:
- China Must Manage Property Market Expectations. China must manage
expectations about rising prices to stabilize the property market, a
front-page commentary by reporter Zhang Min said. Information on
property market polices should be clearly provided as soon as possible
to prevent expectations of policy loosening.
Evening Recommendations
Piper Jaffray:
- Raised (KORS) to Overweight, target $90.
- Lowered (RL) to Neutral, target $170.
Night Trading
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 153.0 +4.0 basis points.
- Asia Pacific Sovereign CDS Index 117.5 +.25 basis point.
- NASDAQ 100 futures +.25%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+940,000 barrels versus a +5,472,000 barrel gain the prior week.
Gasoline supplies are estimated to rise by +570,000 barrels versus a
+3,495,0000 barrel gain the prior week. Distillate supplies are
estimated to fall by -995,000 barrels versus a -1,680,000 barrel decline
the prior week. Finally, Refinery Utilization is expected to fall by
-.94% versus a -1.3% decline the prior week.
2:00 pm EST
- Minutes from Sept 17-18 FOMC Meeting.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Evans speaking, ECB's Draghi speaking, Eurozone Industrial
Production, UK GDP, Australia Unemployment, 10Y T-Note auction, weekly
MBA mortgage applications, (MDCO) analyst day, (HPQ) analyst meeting,
(NKE) investor day and the (CVX) interim update could also impact
trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology
and real estate shares in the region. I expect US stocks to open
modestly higher and to weaken into the afternoon, finishing modestly
lower. The Portfolio is 25% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Almost Every Sector Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 20.64 +6.34%
- Euro/Yen Carry Return Index 137.18 +.16%
- Emerging Markets Currency Volatility(VXY) 9.53 -1.56%
- S&P 500 Implied Correlation 59.52 +2.94%
- ISE Sentiment Index 132.0 +76.0%
- Total Put/Call .90 +2.27%
Credit Investor Angst:
- North American Investment Grade CDS Index 84.04 +1.79%
- European Financial Sector CDS Index 137.78 +1.41%
- Western Europe Sovereign Debt CDS Index 78.0 -1.27%
- Emerging Market CDS Index 290.03 +1.56%
- 2-Year Swap Spread 11.5 -1.25 basis points
- TED Spread 20.25 -2.0 basis points
- 3-Month EUR/USD Cross-Currency Basis Swap -10.50 -3.5 basis points
Economic Gauges:
- 3-Month T-Bill Yield .04% +2 basis points
- Yield Curve 225.0 -3 basis points
- China Import Iron Ore Spot $131.70/Metric Tonne +.23%
- Citi US Economic Surprise Index 43.70 -.3 point
- Citi Emerging Markets Economic Surprise Index .70 -2.1 points
- 10-Year TIPS Spread 2.18 -3 basis points
Overseas Futures:
- Nikkei Futures: Indicating -60 open in Japan
- DAX Futures: Indicating -21 open in Germany
Portfolio:
- Slightly Higher: On gains in my index hedges and emerging markets shorts
- Market Exposure: 25% Net Long
Bloomberg:
- IMF Cuts Global Outlook. Growth
worldwide will be 2.9 percent this year and 3.6 percent next year, the
IMF said in a report released today in Washington, compared with July
predictions of 3.1 percent for 2013 and 3.8 percent for 2014. It sees
emerging economies growing 4.5 percent this year, 0.5 percentage point
less than three months ago, as projections were reduced for China,
Mexico, India and Russia. “Advanced economies are gradually
strengthening” while “growth in emerging-market economies has slowed,”
IMF chief economist Olivier Blanchard wrote in a foreword to the World
Economic Outlook report. “This
confluence is leading to tensions, with emerging-market economies facing
the dual challenges of slowing growth and tighter global financial
conditions."
- German Factory Orders Unexpectedly Fall on Weak Recovery. Orders,
adjusted for seasonal swings and inflation, dropped 0.3 percent
from July, when they fell a revised 1.9 percent, the Economy Ministry
said today in an e-mailed statement. Economists forecast an increase of
1.1 percent in August, according to the median of 40 estimates in a
Bloomberg News survey.
- European Stocks Fall. Telecom Italia SpA (TIT) lost 1.8 percent as Standard & Poor’s said it may downgrade the phone company’s debt to non-investment grade. TGS Nopec Geophysical Co. (TGS) tumbled the most in two years after reducing its revenue forecast. Celesio AG jumped to a three-year high on a report that McKesson Corp. may buy the
German drug distributor.
The Stoxx Europe 600 Index slipped 0.8 percent to 306.84 at
the close in London.
- Treasury Bill Rates Surge to Highest Since 2008 at 1-Month Sale. Treasury
one-month bill rates surged
the highest since 2008 and yields on three-year notes rose as the U.S.
prepares to sell $30 billion of the debt in the first auction of coupon
securities since the government shutdown. The Treasury sold $30 billion
of one-month bills today at a rate of 0.35 percent, the highest since
2008 and more than double the rate on comparable one-month securities
yesterday. Rates on Treasury
bills due on Oct. 24 climbed to the highest since they were
issued in April, after being negative as recently as Sept. 27.
- Plosser Says Delay in QE Tapering Undermined Fed’s Credibility. Federal Reserve Bank of Philadelphia
President Charles Plosser, an opponent of additional stimulus,
said the Fed’s decision last month not to taper its asset
purchases undermined the central bank’s credibility. “To delay tapering of our current asset purchase scheme
without clear and significant departures from prior guidelines
suggested the FOMC was changing the goalposts and deviating from
June’s forward guidance,” Plosser said today in a speech in
Johnstown, Pennsylvania, referring to the policy-setting Federal
Open Market Committee. He doesn’t vote on the panel this year.
“This undermines the credibility of the committee and reduces
the effectiveness of forward guidance as a policy tool.” The Fed’s decision to press on with stimulus “contributes
to additional uncertainty regarding the future course of
monetary policy” and may be interpreted as a sign of decreased
confidence in the economic outlook, Plosser said. “The decision not to begin tapering our asset purchases
was also read in some quarters as a sign that the FOMC had
become much less confident that growth would be sustained in the
manner the Committee envisioned in June,” Plosser said. “Thus,
we undermined our own credibility as well as the public’s
confidence in the economy.” “These were not the messages that I wanted to send,”
Plosser said in his remarks to the Greater Johnstown Cambria
County Chamber of Commerce. “Thus, I disagreed with the
decision not to go forward with a modest reduction in the pace
of our asset purchases.” Fed presidents rotate voting on monetary policy
with Plosser voting next year.
- Fed’s Pianalto Says Fed Should Be ‘Cautious’ in Bond Buying.
Federal Reserve Bank of Cleveland
President Sandra Pianalto, who has supported record Fed stimulus, said
she favored a reduction in bond buying last month because of the
potential costs of the program. “While to date the risks have mostly
remained theoretical, I remain convinced that we need to be cautious in
our expansion of asset purchases,” said Pianalto, who doesn’t vote on monetary policy this year and plans to retire early next year.
“For me the improvement in labor markets seemed substantial
enough to support a scaling back of the asset-purchase program
at last month’s” policy meeting, she said.
Wall Street Journal:
- Parties Diverge in Bid to Break Fiscal Deadlock. House Republicans Urge Budget Talks; Senate Democrats Plan Debt-Limit Vote. The House and Senate headed down separate tracks Tuesday in their
efforts to break the stalemate that has led to a week-old partial
government shutdown. House Republicans, stepping up calls for face-to-face negotiations,
planned to pass legislation that would set a framework for wide-ranging
budget talks. Senate Democrats were planning a vote this week to extend
the country's borrowing authority through 2014, after next year's
midterm elections. The efforts lacked a key component for ending the budget stalemate: endorsement from the other side.
Fox News:
MarketWatch:
- NFIB small-business optimism eases in September. Small-business sentiment edged lower in September on a big drop in the
percentage who expect the economy to improve, the National Federation of
Independent Business said Tuesday. The NFIB small-business optimism
index fell to 93.9 from a corrected 94.1 in August.
CNBC:
- No end in sight for debt addiction: Paul Singer. Billionaire hedge fund manager Paul Singer holds a pessimistic view of
the global financial system, saying he believes the Federal Reserve
easing back on its asset-purchasing program is "off the table" even
though investor confidence could sour quickly.
Zero Hedge:
ValueWalk:
- Dozens of Allegations Against Warren Buffett’s Company. (video) The Scripps National investigative team has uncovered dozens of
allegations that a company that is part of Warren Buffett’s empire
intentionally delays paying insurance money to victims of asbestos and
toxic health hazards.
Business Insider:
Institutional Investor:
Real Clear Politics:
Reuters:
- Obama phones Boehner, repeats he won't negotiate - Boehner aide. President
Barack Obama called Speaker John Boehner on Tuesday about the
government shutdown and a looming deadline to raise the debt ceiling,
and restated his position that he would not negotiate, said a spokesman for
Boehner, the top Republican in the U.S. House of
Representatives.
- Euro zone bonds wilt as U.S. deadlock drags on, Portugal bucks trend. Spanish
and Italian bond yields
rose on Tuesday along with almost all other European sovereigns,
as the U.S. budget stalemate and looming debt deadline continued
to weigh on bond markets worldwide. Plans in both Rome and Madrid to
sell bonds via syndication also put their debt under pressure, halting
the recent relief rally following last week's confidence vote in Italy
for Enrico Letta's government. Italy plans to issue its first ever
seven-year bond on Wednesday, and Spain will also offer investors the
first chance to get 30-year paper since 2009. Spanish 10-year yields
ended up 10 basis
points at 4.31 percent while their Italian equivalents
were 6 bps higher at 4.35 percent.
- Investors take profits in high-flying Nasdaq names. Shares of some of the Nasdaq's
strongest performers this year tumbled on Tuesday as
investors took profits in high-flying names amid growing
uncertainty over the impasse in Washington. Companies in the
technology sector were the hardest hit, with Yahoo Inc, TripAdvisor Inc
and Netflix Inc all among the day's biggest losers, but investor
favorite Tesla Motor Inc also dropped in heavy volume. The Nasdaq
Composite Index was trading down 1.3 percent midday.
Style Underperformer:
Sector Underperformers:
- 1) Biotech -3.82% 2) Internet -2.60% 3) Alt Energy -2.53%
Stocks Falling on Unusual Volume:
- JMBA, GWPH, SOCL, BITA, ACAD, SSW, INSY, MZOR, CLNE, LCI, RH, NJ, SWIR, CIE, PHH, ANGI, JAZZ, LNKD, CGIX, WWWW, NQ, CLDX, CVRR, FENG, SPLK, DECK, BLOX, NAV, CTXS, PKT, PCLN, GSVC, MAS, CIE, YHOO, RHT, LCI, SSNC, BMRN, FB, AMBA, AFOP, ALNY, ABFS, TRLA, ARIA, YELP, OMER, NOW, NPSP and EXAS
Stocks With Unusual Put Option Activity:
- 1) EWJ 2) IBB 3) PAYX 4) XLV 5) EWW
Stocks With Most Negative News Mentions:
- 1) LNKD 2) TRIP 3) PCLN 4) PBPB 5) ACT
Charts:
